South Korea had been a Japanese colony for about 35 years when World War Two ended in 1945. This was soon after civil war broke up as a rivalry between capitalist, United States and communist Soviet Union (now no more in existence).
At the time Ghana gained independence in 1957, according to some writers, its per capita income was higher than South Korea or just about equal. Now South Korea has moved from third world to first within three decades and has been admitted to the exclusive club of rich countries called Organisation for Economic Cooperation and Development (OECD).
How big is South Korea? According to an encyclopedia, South Korea is 36 152 square miles. In 1975, its population was 34 708 542. Its density per square mile was 992 persons. From the same encyclopedia, we learn that Malawi’s area is 46 000 square miles, a quarter of which is made up of Lake Malawi.
According to United Nation’s (UN) calculations, in 1974 Malawi’s population was 4 900 000 and its density per square mile was 104.
Despite starting its independence with over population, South Korea has achieved exceptionally high living standards. Can Malawi despite its excessive population of 17 million people get out poverty and achieve higher standards?
Yes, but not through wishful thinking. It must make use not only of the lessons of economic theory, but also of economic history.
Before the 2007 and 2008 financial meltdown, economists in Europe and North America worked mostly with mathematical economics. Since then, they advocate teaching of economic history besides economic theory and applied economics.
Our national agenda is to develop this country as the sure way of eradicating poverty. By getting acquainted with how South Korea accumulated its wealth and eradicated poverty, we can discover useful formula for economic development. Perhaps yes, perhaps no, but here South Korean story must be told.
In 1945, South Korea made primary school education compulsory. By 1960s, literacy had reached 90 percent. One of the secrets of South Korea’s achievement is the attention it has paid to education which has been the basis of its human capital. Besides being skilled, South Korean workers are highly motivated.
From the early 1960s, the leaders of South Korea were committed to developing their country through exporting manufactures based on heavy industries. They saw their future in industrialisation.
They resolved that South Korea was going to be an interventionists State though not a communist one. The country was going to be developed through big private conglomerate but with the help and guidance of the State. For this reason, in 1972 the government set up the National Investment Fund exclusively to finance long-term heavy and chemical industries. This strategy entailed the sharing of business risks between government and business and was named Government Business Coalition (GBC).
The government subsidised private export industries through interest rates and soft loans. It raised deposit account interest rate to encourage savings. This is how the Far East Tigers’ savings surpassed the average attained elsewhere in the world. Naturally, these savings were used as capital for industrialisation. Export industries obtained from State banks loans at very low interest rates. But they had to achieve export targets otherwise the privileges were withdrawn.
Export industries could obtain loans from foreign banks with government guarantees. But again they had to show the results.
Success lay in correct positioning of the State vis-a-vis business. In the early days of development, business people need more not less State assistance.
Recently, there has been a call for Mzuzu Coffee growers for assistance from government so that they can take full advantage of the unsatisfied demand abroad from the product. This request should not be casually treated. Perhaps we have forgotten at the beginning of the last century, coffee growing in Malawi was more promising than tea and tobacco. Suddenly, the coffee industry had to be discontinued for two reasons. First because Brazil flooded world markets with its over production, prices plummeted. Secondly, a disease invaded coffee fields in Malawi.
While the overseas market is still buoyant, it is the time for government to maximise its assistance to coffee growers and before another tragedy steps in. There is no stability in commodity market.